Millennial Women: Control Your Finances, Find Your Power

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Millennials get a lot of flack these days. But the reality is that they are the fastest growing group in the workforce, and they want their money to reflect their values. They also are dealing with some specific challenges arising from graduating college during a recession and dealing with high debt loads compared to previous generations.

Millennial women? Despite the progress we've made in the women's movement, millennial women still contend with a wage gap.  Women are more likely to be the ones to take time away from work to care for children, and we know that wage gap grows significantly after having children. And of course, women live longer than men! It is more important than ever to apply good financial principles as soon and as consistently as possible.

Fortunately, YOU are in the driver's seat. There are many things you can do take control of your finances so you can achieve your life goals. Have you ever experienced harassment or worse at work? How many of us can say #metoo? Yeah, me too. Women having money set aside gives us the power to walk away from a bad situation at work when you need to, rather than feeling stuck in a situation just because of money. Ditto for our relationships. 

Some of the best advice I have for millennial women includes the following:

1.  Spend mindfully (and track your spending).  We pay attention to what we measure.  Before you buy something, consider whether it’s something you actually value, how you would feel about having spent that money a year from now or 30 years from now.  What additional richness could you bring to your life in the future by forgoing this purchase?  Just bringing awareness to how you spend your money will help you make better choices.     

We all have more discretionary income than we realize. And sometimes you can spend a little money upfront in order to save money long term. For example, if you really love having your fancy coffee every morning, then buy a espresso maker to have at home (or ask for it as a Christmas or birthday gift!) and skip the $5 trip every day. 

The key is to look at how you are spending money, and see if it really brings you closer to your goals. Track your spending for 30 days (or if you buy everything on a card you will be able to look at your transactions). Now ask yourself the following questions: 

  • How did this expense make my life better?

  • Did spending this money get me closer to my life goals?

  • Does this money spent align with my values?

  • Is there a way I could have gotten the same benefit in my life for less money?

  • What patterns in my life are costing my money?

2.  Build an emergency fund.  Cash on hand gives you freedom and the control to choose your own path, to walk away from a bad job situation, a relationship that’s no longer working for you, or just move toward the life you want to live.  If you’re in debt, start with just $1,000. If you don't have some money in the bank, then you will always keep going back into debt whenever life hits you. You want to set up an automatic withdrawal from your paycheck so that you won't ever see that money, and it can start to accrue. 

Another great way to build you emergency fund and savings is to make a plan for any unexpected money you get. Birthday gifts, interest payments, bonuses, etc. It is totally okay to give yourself permission to have a little fun. But make yourself a deal that you will put a certain percentage of any extra money into your savings account. 

3.  Evaluate your debt situation.  Many of you likely have student loans and possibly credit card or other debt.  Write down all debts in order from highest to lowest interest rates.  High interest debt like credit card debt should be avoided and paid off as aggressively as possible, even if it means making sacrifices to your lifestyle. If you have high interest debt, then paying that down as soon as possible will really help your overall financial picture. 

Women tend to have more student loans than men, for many reasons. If this is you, remember that you probably still want to pay off any higher interest debt first, and then you can tackle your student loans with full attention. Check out my financial hierarchy of needs for more info on prioritizing debts.  

4.  Save early and often for retirement.  Time is on your side! If you start saving for retirement in your twenties, you can successfully fund your retirement with much less than if you wait. 

Let me give you an example. I have a friend who has maxed out on her retirement as soon as she could in her twenties. Even when she wasn't making that much money, she made sure to put that money aside. Because of that and her savings, she is now 47, and was able to take a much needed sabbatical from work. She now has a lot of flexibility because she started to save really young. 

There is really no way to replicate the value of money over time! If your employer offers a retirement plan, be sure to contribute at least enough to get the full employer match -- don’t leave free money on the table. Even better, challenge yourself to put in 10% or more of your pre-tax income into retirement or fully fund a Roth IRA each year.  

5.  Align your money with your values.  Millennials are most likely to want to put their money where their mouth is. This is something you can do in terms of how you spend your money, but also with your investments.  Many of my clients are feminists, and I encourage them to consider gender lens investing, which targets companies that specifically source female leadership. Women in leadership beget more women in leadership, which is good for companies and good for women and girls around the world.

With your day-to-day spending, consider what you care about and why? Why spend money on things that aren't meaningful to your life? Of course, you can't get out of paying the electricity bill, but don't get stuck doing things just because it's what other people do. And find friends and other women to connect to who share those values! It will make it easier to accomplish your goals when the people you spend the most time with are on the same page, and have similar money goals as you do. 

So there you have it.  Money = Choices = Power.  Do you need help evaluating your current financial picture and making a plan? Contact me and let's chat! 

Five Financial Moves for Almost-Instant Gratification

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Pinch me, I'm FAMOUS!  Ok, not really.  But I was quoted in U.S. News and World Report!  The author, Andrea Woroch, wrote about 5 Smart Ways to Improve your Financial Health.  I had lots of ideas, but she only used one.  So, definitely check out her article, and my 3 seconds of fame, but read on, my friend!

New Year's Resolutions not your style?  Looking for instant gratification instead of something you have to keep paying attention to?  Look no further.  Here are five smart financial moves you can do ONCE to improve your financial picture.

1) Run your credit report.  You can get a free credit report once per year from each of the three credit reporting agencies (go to www.annualcreditreport.com).  Having a listing of all your obligations gives you a clear picture of what you have outstanding and a chance to fix things that shouldn't be there.  What you don't know can hurt your credit!  Also, identity security is an important component of wealth preservation.  Running your credit report will help you detect potential identity theft.  

Extra credit: Set reminders for yourself every four months to check a credit report from one of the three agencies.  You can also go to www.creditkarma.com to monitor your estimated credit score on an ongoing basis -- big changes in your score may be an indication something's not right.

2) Determine your net worth.  It's just a listing of what you own (assets) and what you owe (liabilities), but it's a great way to get perspective on your overall financial picture.  Having just run your credit report, you'll already have a listing of your liabilities.  Your net worth is a starting point for action -- it can help you diagnose and address your financial issues.

Extra credit: Determine what changes you need to make and set some goals.  For example, you have little in the way of an emergency fund, so you could set a goal for saving $200 a month, or a goal to save $4,000 by the end of the year.  Write it down on your net worth worksheet.  Then review your progress by updating your net worth every year!

3) Find extra money in your budget.  If you're thinking you don't have enough money left over every month to aggressively pay down debt or to save more for retirement, you may just need to look a little more closely. 

Grab your last few bank and credit card statements and find any recurring charges.  Make a list of them and decide if you use them and value them.  If NOT, cancel them immediately!
— Lucy Shair, as quoted in U.S. News & World Report

Also identify fixed costs that may have wiggle room, such as insurance, cell phone or internet.  Often, you can get the company to lower your premium or monthly payment just by calling and asking to speak with the (repeat after me!) customer retention department.  Magic words!

Extra credit: Where do you overspend?  For many of us, it's eating out and thoughtless smaller purchases that really add up.  If you're really trying to tighten your belt -- or just align your spending more with your values -- consider giving yourself an allowance!  You can do this in cash, but I prefer to set up a "spending money" checking account with a debit card.  Transfer a reasonable amount out of your main checking account each time you get paid.  You get guilt-free spending, but when it's gone, it's gone!  Trust me, it will make you more conscious of your spending.

4) Switch to weekly or bi-weekly credit card payments.  Maybe your net worth shows you you've got too much debt.  If you are paying down a credit card balance, you can save money on interest by paying smaller amounts more frequently.  Due to the nature of compound interest, the longer the debt sits unpaid, the more you pay in interest, so the quicker you pay it the better.

Extra credit: Create a debt payoff plan using a tool like unbury.meYou list all your outstanding debts, and pay them off highest interest rate to lower interest rate.  You throw all the extra money you can at the highest interest rate while paying the minimum on other debts until the first one's paid off, then move that entire payment to the next highest interest rate, and so on.

5) Increase your savings.  Most of us are about to get a raise due to the new tax law.  Take advantage of this opportunity to address your financial priorities, which you hopefully identified with #2.  Consider whether you should increase your retirement plan withholding so that your paycheck remains the same.  It's painless and your future self will thank you!  You could also start building that emergency fund by setting up automatic transfers from your checking account to a savings account.  Remember to pay yourself first.

Extra credit: If you're already maxing out your employer sponsored retirement plan, or at least getting the full match, consider whether automated contributions to a Roth IRA is the right choice for you.  All set for retirement?  What else are you saving for? 

Financial Literacy Teachable Moments in Giving Back

Homeless Helpers checking out with their donations for Family Promise.

Homeless Helpers checking out with their donations for Family Promise.

My daughter and her friends in fourth grade started a group called Homeless Helpers.  They were distressed to hear about families and kids who didn't have a place to live and they wanted to find a way to help.  Homeless Helpers hosted many a lemonade stand and cookie sale over the last year and had collected nearly $200, but they weren't quite sure what to do with it.  We moms put our heads together and give them a little guidance.  They ended up deciding to purchase items off of the Family Promise wishlist and deliver them on Martin Luther King, Jr. Day. 

Family Promise is a wonderful organization here in Grand Rapids (and nationwide) that assists homeless families by keeping them together.  Often, when families end up homeless, they have to split up to find shelter, as many women's shelters will accept children but not men.  They keep an ongoing wish list on their website, which made it easy to help out.  Their mission resonated with the girls, so we made a plan to go shopping.

The following Saturday morning, we parents arrived kids, coffee, and wishlists in tow.  We told the girls they would need to decide which products to buy, what varieties and brands, what quantities and how much they could afford.  Let me tell you... we were at a Walmart.  There were CHOICES galore.  So how to choose?  It turns out there were a lot of financial literacy lessons to be had.  I'd encourage you to consider a shopping excursion with your kids to teach similar lessons.  Just be sure to allow plenty of time!  

So what lessons did the girls learn about how to get the most value for their money?

  1. Calculate unit price.  When you're comparing different brands (or store brand) or quantities, the unit price can give you an apples-to-apples comparison and tell you what offers the best value.  Of course, there are other elements of value beyond just lowest cost, but it's a place to start.  For example, I really do think name brand dish soap works better than generic, and you will end up using less, and we ended up choosing Puffs tissues on sale instead of store brand because rough tissues just suck.  Some stores make finding the unit price easy -- it will be listed separately on the price sign, other places are not so shopper friendly.  In some cases, the unit price will just be the price for an entire package, or the unit price displayed may not reflect a sales price.
  2. Look for sales.  Especially when you are choosing what to buy based on availability and price, and especially in a place like Walmart (famous for its loss leaders), see what's cheap.  Then decide what to buy, keeping in mind that just because something is on sale, it doesn't necessarily mean it's got a lower unit price.  
  3. Larger quantities tend to be a better value.  Tend to be, but not always.  Calculate the unit price on the big box first, and then also consider whether you will actually be able to use that quantity.  This is especially important to consider if you're shopping at Costco!  In this case, since the girls were shopping for non-perishable items to cover many families' needs, the largest quantity for the least amount of money was what we were looking for.
  4. More expensive items tend to be at eye level.  Kids are at a natural advantage when it comes to little retailing trick.  There are good deals to be had below knee level.  For my daughter, this was the easiest thing for her to remember.
Comparing the relative merits of different facial tissue options.

Comparing the relative merits of different facial tissue options.

Of course, there are qualitative concerns to address, as well, when you're looking for value.  Nobody wants rough tissues or uncomfortable underpants!  Sometimes you're looking for the best quality for the money, but that lesson is a bit more nuanced.  And sometimes a bit uncomfortable for the girls!  For example, choosing "feminine hygiene" products was a great opportunity to discuss body health, and also societal attitudes.  Eeeew!

"Sometimes getting what other people need is not fun, because getting boxer shorts is not fun!" -- J, age 9

Another big lesson of the day?  How incredibly expensive things are.  The girls were aghast to learn that a case of diapers that would probably last one kid two weeks cost $20!  Even more aghast when you multiply $20 x 26, making the annual cost over $500, just for diapers!  Minds BLOWN.  We moms are really hoping this lesson sticks to help the kids maintain some perspective on just how privileged they are.

Overall, this was a great experience for the girls.  They were thrilled to be able to help, and Family Promise was just wonderful when they delivered the items.  The volunteer coordinator Chelsea showed us a video about Family Promise, what they do, who they help and how they help, and answered their many, many questions.  She also gave us a tour of the facility and let the girls help put the items away.  They were so excited to do more, they were able to volunteer with Interfaith Hospitality Network, the part of Family Promise that houses families overnight, just two days later.  I hope their enthusiasm continues and that we can build on these teachable moments going forward!

The next time your kids are on a shopping trip with you, consider having them use a calculator to determine your unit costs, or help you add up your purchases (don't forget tax!) to stay within a budget.  What we take for granted as common sense become teachable moments for them.  What financial literacy teachable moments have you shared with your kids?  Leave a comment to share your tips!

homeless helpers with some of their bounty at family promise

homeless helpers with some of their bounty at family promise

Pay off Debt or Save for the Future? Here's How to Decide.

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Got debt?  Need to save?  Guess what, you're not alone!  But how do you juggle competing demands for your financial resources?  This is a question many of you have, and I addressed it in a Facebook Live not long ago.  You know you're supposed to save for retirement -- according to some, we should have three times our salary saved by age 40! -- but who can think about retirement with a bunch of student loan or credit card debt?  While there is no one-size-fits-all answer, here are some guidelines you can apply to your decision-making process.

Thanks to college psychology classes, this diagram is probably familiar to many of you.  As Abraham Maslow had his hierarchy of human needs, I propose this as your Hierarchy of Financial Needs.  Reading from the bottom up, consider your priorities as follows:

Bills and Basic Needs.  Notice I said needs and not wants -- many of those wants come in after the next step. If you cannot cover all your bills and basic needs, you will need to take a hard look at your budget to see where you can shave spending. Start by tracking your spending.  I know it's tedious!  But you must know how you've been using your money.  We pay attention to what we measure and we improve where we pay attention. And if you have a work retirement plan with a match, fund it to get the full match!  Don't leave free money on the table, and your future self will thank you.  Note, this is *not* the same as maxing OUT your retirement funds.  That comes later.

Emergency Fund.  If you have high interest debt, paying it down must be a priority.  But having no financial cushion can lead to even more debt!  Slash your spending, sell your stuff, pick up a side job -- whatever you need to do -- to get that first $1,000 in the bank and keep it there.  You can do it!  When you need to dip into it, for emergencies only, sacrifice again until you've got that $1,000 built back up.  Once you've paid off your high interest debt, it's time to start building that 3-6 month emergency fund.

High Interest Debt. Make a list of all your debts, from highest to lowest interest rate.  I love the "snowball method" for the quick win and psychological boost, but I'm good at math, too, so highest interest rate first!  If you need the boost, contact me and I will do a virtual happy dance for you!  Better yet, remember to pat yourself on the back for getting your financial life in order.  It's important to celebrate incremental progress along the way.

There are many debt repayment tools and calculators available, but the basic concept is to pay as much as you can toward that highest interest rate debt, while paying the minimum on the others, until the highest rate debt is gone.  You then reallocate that payment amount to the next-highest interest rate debt, and so on.  It's also important to change the behaviors that got you into debt in the first place.  For you, that may mean eschewing credit card points and using debit card or cash -- that's okay!  You can save always money to go on vacation.  But first, build up some savings in your emergency fund.

Other Debt.  This includes student loans, car loans, mortgages, home equity and personal loans.  To prioritize these, compare what you would be paying in interest to what return you might expect to receive if you were to invest.  Paying off debt is like a guaranteed investment return equal to your interest rate!  Keep in mind that interest that can be written off on your taxes, such as student loan and mortgage debt, has a lower effective interest rate.  For example, if you have student loans at 4% and you can write that interest off, the "real" interest you're paying is slightly less.  This will be relevant for fewer of us, however, as the new tax law has doubled the standard deduction and most will take that instead of itemizing.

What, then, is a reasonable expectation of the returns on your investments?  We know that historically the S&P 500 has returned 8-10% on average, but investments tend to perform better than individual investors (a conversation for another day), plus past performance is not necessarily indicative of future results.  Personally, I draw the line around 5-6% -- below that, and I’ll let the debt ride and invest my extra money -- above that, and I’ll pay it down more aggressively.

One more thing about debt.  For many of us, there is an emotional cost in addition to the financial cost of carrying debt.  Your wellbeing is an important return on investment, too, so if having outstanding debts makes you anxious or keeps you up at night, act accordingly.

Retirement Savings Now that you’ve paid off your higher-interest debt, it’s time to get serious about saving for retirement.  Of course, you’ve been maxing the match from your employer plan for a while -- starting early is so important! -- but now you’ve freed up enough money to be able to do more.  That’s great!  Aim to save at least 10-12% of your total income for retirement if you’re starting early.  The later you start, the more you’ll need to save.  If you’re already getting the full match through your employer, consider other options for your additional savings, such as a Roth IRA.  These are an especially good option for younger savers, as the money goes in post-tax and growth on your contributions is never taxed! 

College Savings.  Are you a parent?  Guess what, me too!  So I know how much you want to be doing the very best for your kids.  But if you save for college at the expense of securing your own future, you are doing them no favors.  Put your oxygen mask on first by saving enough for retirement before you start on college.  How much to save, you ask?  There are some great tools out there for projecting college costs and how much you’ll need to save.  This is one of my favorites.

Other Savings Goals. Once you’ve paid off your high interest debt, are on track for retirement and saving for college, what’s next?  Well, that’s up to you!  I bet you've got some pretty exciting dreams for your life, so let's start thinking about how we can make them a priority.  I certainly don't want to imply that you can't have fun or live your best life now -- you can, and part of my job is to help people quantify that freedom -- but there are some big ticket items that may need to come after you've got the basics in order.  This process is not really designed to be linear, but the hierarchy can help you step back and get perspective on your financial situation and how to proceed next.  It's a great feeling of power to know how you'll use that next dollar to make a life you want to live.

And at the top of the hierarchy?  What does that look like for you?  What does having enough mean to you?  It all depends on why money is important for you and how you expect it will impact your life.  What are you working for?  Maybe you want to retire early, or maybe you want to live your retirement lifestyle now, like Tim Ferris and his 4-Hour Workweek.  If you'd like a guide helping you find the path that's right for you, contact me and let's chat!

 

 

Happy New Year and Welcome!

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Happy 2018 and welcome!  I'm so glad you're here.  It's a brand new year, and that seems like a good time to launch a brand new blog and website.  A little bit about me: I'm a fee-only fiduciary financial advisor with Action Point Financial, based in Grand Rapids, Michigan.  I'm on a mission to increase financial literacy, empower women to take control of their finances and ultimately improve lives.  I've worked in financial services for about 15 years as a CPA, auditor and consultant.  After a career pivot into financial planning, I'm trying to make the world a bit better every day by sharing my knowledge to help people gain a better understanding of personal finance.  I've been doing this through my Facebook page, and now I'll be doing it a bit more in depth here.

Of course, Action Point already has a great website and online presence, which you should go check out!  But I wanted something a bit more personal and where I could write as much as I wanted on topics that matter to my people.  So here we go.  Remember, this is for you, dear reader... feedback and direction are welcome.  Leave me a comment to tell me what you're excited about for the new year, any resolutions you've made (especially if they're financial) and what you'd like to read about.  I hope you enjoy what you find here and don't forget to sign up for updates!

PS: if you're not sure what I mean by a "fiduciary" advisor, check out my article explaining what a fiduciary is, why it matters and how to figure out if you've got one.  Or just get in touch and we can talk about it!